Creditors Try to Collect"
"College is for kids with
rich daddies and should never be taken too seriously," insists
author George (who drank his way through Colgate in the 1950's).
Author Steve, who had full scholarships to college, agrees. (However,
Steve's wife, who borrowed her way through college, is on track to be
paying her last student-loan installment with her first social
security retirement check.)
system that is constantly moving the goalpost forward, that old
elitist institution, college, has been sold to the consuming public
as a life-necessity. It has become acceptable for innocent,
not-so-rich youths to go deeply into debt while striving for the
golden diploma, lest they be left behind in some misty socio-economic
limbo. Driven by this psychology, the student-loan biz has exploded
and is now in a deep crisis of defaults, like other sectors of
finance, although this crisis is not getting any press.
are the Federal Guaranteed Student Loan, the National Direct Student
Loan, and private commercial plans from banks and finance companies.
Loans to the student are federally guaranteed (and therefore
creditworthiness is not a consideration). Loans to students' parents
(called PLUS Loans) are not federally guaranteed and are based on the
parents’ creditworthiness. Some lenders deal only with parents.
No rights for the lowly
Fannie Mae of student lending is Sally Mae, a
government-created middleman of the 1970's that turned itself into a
private for-profit corporation in the 1990's. Sally Mae then lobbied
a receptive Congress into canceling all consumer rights for the lowly
student, including the statute of limitations, the right to
bankruptcy, and the right to refinance. Sally Mae would like to get
into the collection business. Sally Mae bundles its student loans and
sells them in financial markets. For this reason, Sally, like her
mortgage siblings, is in crisis.
average student graduates $20,000 in debt! A burden of over
is not uncommon for an advanced degree. Thirty percent of student
loans go into default. What a way to start out life! This is a very
recent phenomenon. The cost of college has ballooned, just like
real-estate, and it now costs an average $136,000 for a four-year
degree. Prep schools ditto. As with housing, unaffordability drives
the lending market. Borrowing has doubled in the last decade.
Students have borrowed $85 billion.
the objective of the system to liberate the individual through
education or to lock him into conformity for a lifetime? If you don't
have a rich daddy, can the rewards be sufficient to justify the
Today's financed college graduate, whatever dreams he may
have started out with, begins his professional life as a submissive,
indentured servant of the system, obligated to payment for endless
years. Whatever narrow professional edge he may have gained, his
life-choices and consciousness have become narrowed by his
desperation to get clear of debt. He is also likely to have become an
intellectual prisoner, for he dare not question any of the collegiate
mythologies he's been taught at such huge expense. For example, he
will not get any debtsmanship in his economics courses, for the basic
understandings are academically taboo. Any professor who would expose
the deception of the credit-selling system, especially as it
functions on campus, and dare to warn his students against
participation, is not likely to progress far in his career.
barely getting into the news, but student lending is just as big a
scandal as mortgage and credit-card lending. Student lending has
created a national tragedy. The problem is becoming generational. One
college debtor may marry another, and the couple may start out
jointly owing $350,000. The children of perennially indebted parents
go off to college and continue the tradition. Desperate student-loan
debtors have been fleeing the country, and some have committed
scale of the student-loan biz rivals that of credit-cards. Student
lenders are up to the same unsavory stratagems as credit-card
lenders. They are as quick to levy capricious late fees, default
interest-rate hikes, and exorbitant penalty fees. Like credit-card
lenders, student-lenders try to throw accounts into default so that
they can jack up interest rates. With this particular high-risk
financial product, that's where the managers think the money is.
lofty institution of the university is behaving like a for-profit
corporation itself and has made collusive alliances with banks,
credit-card companies (and with book publishers as well). In the news
are reports of college officials, including venerable university
presidents, resigning in disgrace, for it has been revealed that the
campus financial advisor is not like a faculty member with the
students' interests at heart but works for a bank, is on commission,
and gives kick-backs to the college.
years ago, some colleges still offered their own in-house
student-loan programs, but even then there was a trend to outsource.
For the college it's a cash-flow advantage to have all that tuition
up-front from a bank rather than in installments over time. Also it
was a sensitive situation for a school to be a bill collector to its
once independent campus has become a marketplace for credit sellers,
and school and financial corporations have become inextricably
entwined. College textbook publishers are free to scam the students
with exorbitantly priced textbooks, compounding the student's debt. A
tenured professor (who today may be earning an executive-level
six-figure salary) can augment his income with royalties on his
overpriced textbook, which he has authored under contract to a
publisher and which he requires for his students. Books for one
semester can cost $1200. If a student does not have the cash,
credit-card salesmen have set up in the bookstore and are right there
to help him into more debt. Credit cards flow freely on campus, and
84 percent of students carry them.
credit-card and other debtors, the student-loan victim has no right
to bankruptcy, has no consumer protections whatsoever, and is singled
out for special hassles and oppressions.
day that I rewrite this section, it's in the news that President
Obama wants to eliminate Sally Mae. (The same news cycle announces
the apparent suicide of the CFO of Freddie Mac.) Obama says Sally Mae
has to go so that government can deal with students directly. Sally
is fighting back furiously, says the news. Will some reform of
default interest hikes and similar rip-offs come out of this crisis?
for non-government student loans resemble those of other unsecured
loans. (See banks
and finance companies
above.) Student lenders have unique collection challenges. Skip
tracing is often necessary, as former students drop out or move
around. Collector's often hound a student's parents.
student loans cannot be discharged in bankruptcy and have no statute
of limitations, the debtor can get sued forever. The government can
intercept tax refunds, can deny security clearances and can deny
occupational licenses or suspend them. (Author Steve has a client in
Louisiana who was denied a casino employee’s license for a
delinquent student loan.) The government can seize social security
and disability payments. It can garnish wages without the usual
due-process. A delinquency can ride on the debtor's credit report
indefinitely, for the Fair Credit Reporting Act sets no time limits
for student loans.
Challenge the validity of the debt.
Since your student lender may have been bundled your loan into some
financial product and sold into the marketplace, like a mortgage,
original documentation on the loan may be long-lost. If you have paid
nothing on the debt, you may be able to deny that it is yours and to
challenge the collector to prove otherwise. This is a possibility
that should be explored experimentally. Any loan type that has been
parsed into pieces may have problems in proving validity in a court
of law, but no one should rest assured that this is necessarily the
case. The strategy is experimental. The debtsman is an experimenter.
an IRS interception. The
lender or guarantor of a defaulted student loan will tell the IRS and
the state to intercept tax refunds. While this is effective, it's
also easily defeated by the astute debtsman. How? Change the
withholding on your paycheck so that at end of year you owe some tax.
Sally Mae cannot intercept a refund if there isn't any.
relief for the student debtor? It
may even be possible to discharge the debt in bankruptcy if you can
establish an unusual medical burden. There are loan-rehabilitation
programs that collectors encourage in which the debtor signs some
papers and his delinquent loan becomes current, but the terms may be
onerous.. It may be possible to wiggle out of some of the obligation
on your defaulted student loan by pleading that medical problems make
it impossible for you to work or to shoulder the payments. If you are
a medical professional, like a nurse, there is a special relief
Expatriation? Don't panic, says debtsmanship. Fight. You would think
this particular class of victims would revolt. Are not students the
most revolutionary of populations? (Perhaps this is why the system
wants them neutralized by debt.) Actually, victims are finally
organizing into movements of resistance. One campaign is Reduce the
Rate from Jessie Jackson (reducetherate.org). As with mortgage loans,
the black population has been particularly targeted.
College Loan Scam
is an expose' by Allen Michael Collins. A student debtor himself,
Collins had asked for forbearance on his $38,000 loan, but the loan
holder responded by throwing the loan into default, which soon drove
the sum up to $100,000. His book is an act of debtsmanship.
best strategy may be to join the existing campaign or to start a
student debtsmanship campaign of your own.
Copyright © 2012
by George Trinkaus and Steve Katz.
from Print Forever, an imprint of High Voltage Press
email@example.com, 877-263-1215, POB 1525 Portland, OR 97207